Largest MFI joins peers in flagging stress pockets

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Bandhan Bank’s asset quality issues, high credit cost keep investors on edge “Then, of course, there has been an impact of (the) heat wave in the first quarter of this year and some degree of restricted movement of people during the course of election and hence, some of the northern states were hit largely because of that. Pockets of Tamil Nadu, Maharashtra, Madhya Pradesh were (impacted) because of monsoon as well," Kothari told analysts on 20 July. Another lender Ujjivan Small Finance Bank recently reduced its loan growth guidance for FY25 to 20%, from 25% earlier.

This was reported to be on the back of stress in certain areas. Credit bureau Crif High Mark highlighted the rising delinquency in a report in June. Microfinance loans with repayments overdue between 31 and 180 days rose to 2.1% of the overall book in March, the report said, up from 2% in December.

Total outstanding loans in the sector stood at ₹4.4 trillion as on 31 March, up 26.8% from the same period last year. CA Grameen’s gross bad loan ratio, measured as loans that are overdue by more than 90 days, was at 1.13% as on 30 June, up from 0.94% as on 31 March. “We provide for loans as NPA at 60 days, as against 90 days by the industry norms.

Because we recognize early, our credit cost is comparatively higher," Hebbar said. Experts said many borrowers have become over-leveraged due to a mushrooming of unregulated lenders. While the regulator has issued guidelines that monthly loan repayments should not exceed half of the overall household income, unregulated entities would not be as compliant.